SECRETARY FOR JUSTICE v. HUI SIU MAN, RICKY

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

Application for Review
1998, No.10

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J U D G M E N T

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Power, V.-P. (giving the judgment of the Court):

1. The respondent faced 6 charges - 3 of forgery and 3 of theft. He pleaded guilty before District Judge Muttrie and was sentenced to imprisonment for 21 months on each of the charges with the sentences ordered to be concurrent. The judge further ordered that the sentence be suspended for a period of 3 years. The Secretary for Justice now asks this court to review that sentence on the ground that it was wrong in principle to suspend sentences for serious commercial fraud involving breach of trust.

2. The facts must be looked at with care.

3. At the time of the offences, the respondent was the supervisor of the import department of the Kwong On Bank. He had joined the bank in 1981 and was promoted to that post in 1993. His duties included the supervision of the entire "inward collection bills" operation of the bank. In July 1996, he set up a sole proprietorship Hung Fai Company ("Hung Fai"). In early September 1996, Hung Fai opened a current account and an import/export account with Hua Chiao Commercial Bank. The respondent was the only authorized signatory of those accounts. We will set out in full the facts relating to Charges 1 and 2. The 3rd and 4th and the 5th and 6th charges follow the same pattern.

4. On 18th September 1996, Hung Fai presented a set of shipping and commercial documents to the export department of the Hua Chiao Commercial Bank instructing the bank to send these documents to the import department of Kwong On Bank for collection of payment. These documents, which included both bills of lading and invoices, showed that Hung Fai had shipped $137,300 worth of frozen Turkey wings from the United States to Hoi Ling Industrial Limited ("Hoi Ling") in Hong Kong. Hoi Ling was a customer of the Kwong On bank. There was, in fact, no transaction of any sort between Hung Fai and Hoi Ling. The Hua Chiao Commercial Bank was under no duty to check the authenticity of the documents and simply presented them to the import department of the Kwong On Bank for payment.

5. The documents arrived at the import department of the Kwong On Bank on 23rd September 1996. Instead of following the usual procedure, which would have been to contact Hoi Ling to obtain authorization to make payment, the respondent produced a forged authorization letter purporting to have been issued by Hoi Ling and signed by Mr. Li Zhi-yong, the authorized signatory, which authorized the Kwong On Bank to debit a sum of $173,300 from the bank account of Hoi Ling for the payment of the inward collection bills. The respondent had taken a valid authorization letter from Hoi Ling, effected the necessary changes, photocopied the alteration to conceal the changes and used the photocopy as the authorization letter. The respondent initialed a letter signifying that he had verified its authenticity. The Kwong On Bank, acting upon this forged authorization, debited Hoi Ling with $173,300 and wired that sum, net all charges, to Hua Chiao Commercial Bank which credited the money to Hung Fai's account.

6. The respondent, by similar frauds, had $418,363.53 credited to the Hung Fai account on 29th October 1996 and $40,000 credited to that account on 21st February 1997. In all $631,663.53 was debited from Hoi Ling's account and the respondent, in an endeavour to conceal this, used his authority to make a number of transfers of funds from other customers' accounts into and out of the Hoi Ling account.

7. On 16th May 1997, a customer complained and the matter came to light.

8. When confronted, the respondent signed a letter admitting his wrongdoing and promised to make full restitution which he did on 30th May 1997. He was then dismissed.

9. It is to be noted that when this matter came to light on about 16th May 1997 that the respondent immediately signed a letter admitting wrongdoing and on 30th May he repaid the full amount.

10. Kwong On reported the matter to the Hong Kong Monetary Authority and was advised to report it to the police. This the bank did and the respondent was arrested on 28th July 1997. Under caution, he again admitted that he had created bogus shipping and commercial documents and presented them through Hua Chiao Commercial Bank to the Kwong On Bank for payment. He admitted forging three authorization letters and causing the amount referred to therein to be credited to Hung Fai's account, and withdrawing the money from that account.

11. The police were unable, however, to confront him with the documents as they remained at that stage with the bank. After 28th July, nothing occurred for a number of months. We are told by Mr. Saw, S.C., who appears for the Secretary for Justice, that this was not the fault of the investigating police but that it came about because the bank failed to produce relevant documents and to provide statements from the bank officers involved. The police were told on more than one occasion that this was because the officers involved were in China.

12. It was not until February 1998 that some documents and statements were obtained. These were sent to the Department of Justice for advice. Advice was given as to the way in which the case should be prepared but the respondent was not charged until 3rd June 1998.

He had made a full and frank confession on about 16th May 1997, he had made full restitution on 30th May 1997 and he was arrested on 28th July 1997. He was, however, not charged until 3rd June 1998, more than 12 months after he had admitted the offence. There is no suggestion that he had ever resiled from his original admissions or in any way failed to co-operate with the authorities. Mr. Saw concedes that there was delay but points out that it was in large part caused by the lack of cooperation on the part of the Kwong On Bank.

13. The trial judge when sentencing said:

"The defendant is guilty of breach of trust. In deciding on sentence, the leading authority in Hong Kong is the English case of Barrick [1985] 81 Cr.App.Rep. 78 which sets out the various matters to which the courts must have regard, though I accept at the same time that one must take into account the differences between conditions in England and Hong Kong. There is authority for that in the case of CHAN Wing-chan Cr App No. 525 of 1989.

The defendant was a senior bank clerk who had been with his employer since 1981. Much trust was reposed in him. This was a premeditated series of offences. He set up his own company so that he could forge documents supporting bogus transactions by that company. He took a lot of money and he used it for himself to pay off his debts. No doubt he also caused a good deal of difficulties to others in his attempts to cover up what he had done. On any reckoning, the offences are serious. However, ultimately there was no real effect on the victim. All the money was repaid and repaid promptly and before any criminal proceedings were initiated.

The bank was obviously quite happy to leave it at that. Also, there would be no impact on the public's confidence in the bank because there was no loss to the customer from whose account the money had been taken.

A further point in the defendant's favour is that there has been a considerable delay in bringing the matter before the courts. As I have said, the bank was quite happy simply to sack the defendant once it had got its money back from him. It was only wider considerations by the Hong Kong Monetary Authority which led to this prosecution.

But even though the defendant was arrested in July 1997, he did not come before the District Court before 25 June 1998. I know when he appeared before a magistrate because I have a memo from the Magistrates Court. It shows that he first appeared before a magistrate on 10 June. I do not know why this delay existed. In Barrick's case, it is suggested that a delay of two years may be taken into account. Here, it was nearly one year but when one considers that the defendant was originally allowed to think that the matter was ended with his dismissal, I think that the delay may properly be taken into consideration.

I also, of course, must take into consideration the fact that the defendant has lost a job of long standing with the bank and he is probably not going to be able to get a decent job in any kind of accounting business or position ever again. He is reduced to working as an accounts clerk in a karaoke nightclub which is no doubt a position of trust but it is hardly the same as working for a bank.

Taking these factors into account, I consider that a proper starting point for each of the offences is 3 years. They can all be regarded as part of the same transaction and sentences should run concurrently.

The defendant pleaded guilty at the first opportunity and he is entitled to the customary one-third discount. I think that having regard to his good character and the fact that this matter was left hanging over him for some time, as well as prompt restitution made before any criminal proceedings, which of course shows remorse, may be taken into account to provide for a further discount of 3 months.

The norm for this kind of offence is an immediate custodial sentence. I have to consider whether in this case the sentences may be suspended. The defendant's solicitor says that there is no need for an immediate custodial sentence. In the general case, of course, there is such a need because employees in positions of trust must be deterred from stealing from their employers. Here, however, there is clearly no need for the particular deterrence of this hitherto respectable man who has thrown away his career, who made restitution voluntarily and before any criminal proceedings were issued, and who has been left for an unexplained and quite lengthy period with the matter hanging over his head.

In the circumstances, I think suspension is proper so there will be a sentence of 21 months on each of the six charge all concurrent, all suspended for 3 years."

14. This court has been told by Mr. Buchanan, who appears for the respondent, that he borrowed from friends and acquaintances to make the repayment to the bank and that each month he repays $10,000 of those borrowing. This he will have to continue for the next 40 months. He has worked, since 1st July 1997, as an accounts clerk in the accounts department of the New Flower City Karaoke Nightclub earning $15,000 per month.

15. Mr. Buchanan has told us that, having made the $10,000 per month repayment, he is left with only $5,000 to provide for his wife and child and has to supplement his earnings with financial support from his brothers and sisters. By the time he was charged, he has been working in his new position for almost one year. As at the date of this hearing, he has been so employed for more than 16 months.

16. Mr. Saw refers us to the passage from the judgment of Lord Lane, L.C.J. in Barrick at p.143, where he said:

"In general a term of immediate imprisonment was inevitable, save in very exceptional circumstances or where the amount of money obtained was small. Despite the great punishment that offenders of this sort brought upon themselves, the court should nevertheless pass a sufficiently substantial term of imprisonment to mark publicly the gravity of the offence. The sum involved was obviously not the only factor to be considered, but it might in many cases provide a useful guide."

17. The issue before this court is whether there were any exceptional circumstances which would justify the judge's suspension of sentence.

18. It is worthy of note that the court in Barrick was not dealing with a defendant who had shown genuine remorse and made full restitution. The character of Barrick and his attitude to the offence is set out by the Lord Chief Justice, at p.147, as follows:

"He used his position of trust to make away with sums which cannot be accurately quantified, but certainly ￡9,000 or thereabouts, and may have been a great deal more. The money was stolen from private individuals who could ill-afford the loss. They were, in short, mean offences. He gave no help to the police. Indeed the version put forward to the police was as we have indicated. He fought the case over a period of some nine days, and the fraud itself lasted overall from April 1982 to December 1983, and the worst period was the twelve months between December 1982 and 1983. The only thing that we can see that can be said in his favour, apart from those we have indicated, was the fact that he did make a number of incidental admissions of fraud during the trial which the judge noted in his sentencing remarks."

19. However that may be, Mr. Saw points out, correctly, that this was a carefully planned and executed series of frauds over a long period which involved grave breaches of trust. He submits that in such circumstances the fact that restitution has been made is no warrant for suspending the sentence. He argues, again correctly, that if that was so, it would almost be an inducement to persons to take the risk involved in such offences knowing that, if they were caught, they could avoid imprisonment simply by paying back the amount they had stolen.

20. We acknowledge the force of Mr. Saw's argument and make it plain that, had restitution been the only factor in the respondent's favour, we would not have considered that the judge was right to suspend the sentence.

21. The further factor which we consider to be of crucial importance was the delay in the prosecution of the offence after the respondent had acknowledged his guilt. This delay has given him the opportunity to rehabilitate himself by obtaining steady employment and to repay a very large amount of the money which he had to borrow to make restitution. We are satisfied, weighing all of these factors, that we can properly hold that there are very exceptional circumstances.

22. We think it proper to make this final observation. In cases of commercial fraud it is uncommon to find an immediate acknowledgment of complicity and full restitution. Usually, the offender pleads that no money is left either because of business or, very commonly, gambling losses. The unfortunate victims simply have to bear their loss. We are fully mindful of the duty of the courts to pass sentences which will protect the community by deterring persons who might be like-minded from committing similar offences. Indeed, in the past that has been the overwhelming consideration. However, in modern times, more emphasis has been placed on factors such as rehabilitation of offenders and the interests of the victims of crime. There is no encouragement to make restitution if the offender knows that it will have little effect on sentence. We are satisfied that full restitution, particularly in commercial crimes, must be encouraged and that this can only be done if real weight is given to it as a factor mitigating sentence. We repeat, however, that, of itself, is not a "very exceptional circumstance" which would warrant a suspension of sentence .

23. Even when we bear fully in mind the seriousness of these offences, we are unable to say, in the circumstances of this matter, that the judge's decision to suspend the sentences was wrong in principle.

24. The application must, therefore, be refused.